You keep forgetting: this was a pretty vanilla risk
transfer for the time, 7 or 8 percent on a loss-
remote finite deal: standard. The whole climate, the market,
the level of scrutiny—it was a different world
back then: no broker would’ve balked. Some of the cat coverage
in those days—let me put this gingerly—we used to write

excess cat coverage—or we’d have some offshore captive write
it—where the top layer would have maybe 2 percent risk—
with a huge potential downside, sure, if the coverage
got tapped, but on these fancy finite products the losses
had to be crazy-ass crazy, real ASTEROID HITS, WORLD
ENDS–type stuff, for the policy to kick in. The markets

insisted on heavy insulation, any market
for earnings-protection policies wanted them written
to withstand—I don’t know—nine or ten 9/11s, world-
shattering Book of Revelation cats: the transferred risk
was tiny, a little, um, well, loanlike, because the losses
were so systematically walled off from the coverage.

Enough background. Let me try to explain the coverage.
Remember that they were the principal retro market
for business written by their subs, on the hook for losses
flowing in from everywhere: some insane Irish sub writes
a cat product for some Yemeni power plant, the risk—
the excess, anyway, above some threshold—mounts up, world-

wide exposure, based on whatever bets some burnt-out world-
weary rogue sub made. So they need some retro coverage
themselves. They buy some. But they don’t cede enough risk
to please their fretful parent, so they start seeking markets
for more accounting-driven products. Enter us: we write
an odd little treaty that will pass GAAP loss-

reporting—yeah, I know—and so: anxious parent gets loss-
protection it craves, margin is manageable, the world
is happy and safe. But nobody could’ve guessed when we wrote
our draft, the exclusions in the underlying coverage
from one sub were all fucked up, so the models the markets
were using were off. Thus: long-tailed exposure, big fat risk.

With no losses, who cares? But the wrong cats hit: a coverage
fight erupts. An old story: bad year worldwide, the markets,
pissed: we get blamed for writing the thing, for every rued risk.